Chronic proliferative and erosive synovitis, as well as hepatic granulomas, can be induced in susceptible rats by systemic administration of aqueous suspensions of cell wall fragments from selected bacteria, such as group A, B or C streptococci and Lactobacillus casei. The arthritis resembles human rheumatoid arthritis in its clinical, pathological and immunological characteristics. The development of acute and chronic disease is a direct consequence of the deposition and persistence of cell wall fragments in hepatic and synovial tissues, primarily Kupffer and endothelial cells, respectively. Comparative studies in athymic/euthymic and cyclosporin A treated/control rats have demonstrated that the early acute phases of disease are independent of the thymus and T-lymphocytes; whereas, the chronic phases are thymus-dependent. Chronic disease is characterized by tissue infiltration with lymphocytes bearing T helper/inducer cell surface markers. Interestingly, bone and cartilage destruction appears to be mediated by a "transformed" appearing fibroblast-like synoviocyte. Proliferation and bone destruction mediated by these cells is driven by mononuclear cell derived cytokines. The destructive process is inhibited by cyclosporin A and the retinoid, 4-hydroxyphenyl retinamide. The development of disease is paralleled by enhanced tissue expression of class II-major histocompatability antigens. Enhanced expressed of these antigens is not observed in resistant rat strains. This animal model provides a powerful tool to investigate mechanisms that regulate susceptibility to chronic inflammation, as well as mechanisms involved in tissue destruction such as exhibited in rheumatoid arthritis.